State government retirees will no longer have health insurance premiums deducted from their pension benefits following a Sangamon County court ruling Thursday.

It will be months, however, before retirees will begin seeing a return of the insurance premiums they already have paid.

Judge Steven Nardulli issued a preliminary injunction Thursday that will stop the state from continuing to deduct health insurance premiums from retiree pension checks.

Chief deputy attorney general Brent Stratton said the withholdings should stop for checks going out Oct. 1 and later. Because the order will take time to implement, the changes can’t be in place by Monday, he said.

“The only reasonable expectation that we had coming into this hearing today was met,” said Don Craven, one of the attorneys representing retirees in their fight to stop the health insurance premiums. “The judge has ordered that all withholding be stopped as quickly as possible.”

The Illinois Supreme Court ruled in July that state-subsidized health insurance is a protected pension benefit and the state cannot charge premiums for it. People who retired with 20 or more years of service were entitled to premium-free state health insurance.

Despite that ruling, the state continued to deduct premiums from retiree pension checks because the Supreme Court sent the lawsuit back to Sangamon County for further proceedings.

Retirees are paying 1 percent of their pension checks toward their health insurance if they are covered by Medicare and 2 percent if they are not covered by Medicare.

Left unresolved was how to return millions of dollars in insurance premiums that retirees have paid since July 1, 2013, when the premium payments began. Lawyers for the state wanted time to make additional filings in the case. The next hearing isn’t scheduled until Nov. 21.

“At the rate we’re going, that probably won’t happen until next year some time,” said John Myers, another attorney representing retirees.

Nardulli flatly told the attorneys that he doesn’t “intend to bog this down for several years.”

“I think the Supreme Court was pretty clear that all monies owed to retirees be returned to them,” Nardulli said.

That may be easier in some cases than others. Money withheld from members of the State Employees’ Retirement System has been held in an escrow account. That account had $24.9 million in it as of last week, Myers said.

Premiums withheld from members of the other state retirement systems were not held in escrow.

“If the money is in (the general revenue fund), there could be some difficulties getting that money back to those retirees in the other systems,” Craven said.

Attorneys said there will have to be an accounting for money paid by the retirees and how much by each individual. Nardulli said he wants to ensure a system is worked out so that retirees don’t have to go the Court of Claims to recover what they’re due.

Page 2 of 2 - Even in the case of the SERS escrow account, Myers said they’re going to ask for a financial review.

“We’re going to want an accounting of interest earning and why that interest, apparently, has not been credited to the escrow,” he said.

The court will also have to work out how much in attorney fees can be deducted from the refund amounts.